Sunday, September 18, 2011

"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" - JMK

- Sylvia Nasar has another great article on Keynes. She's speaking at the Mercatus Center in November, the day I present at APPAM and the night before Kate and I leave on a trip... it seemed like too much to squeeze in, but now I'm thinking I might want to show up. I liked to things about this article especially: (1.) it explained Keynesianism easily without resorting to consumptionism, and (2.) I like the details on Marshall.

- Lots of times when I argue with libertarians, I criticize what I consider to be their dangerous foray into social engineering. On the American political spectrum right now, libertarians propose considerably more radical shifts in the way society is organized than any other group, and for an economist that thinks these social orders evolve that seems suspect. So I found Karl Smith's coining of the phrase "liberalization failure" interesting. His concern is a little different from mine, of course. He defines it as: "When attempts to leave a market to its own devices results in a social backlash and the adoption of policies worse than what would have prevailed had the government taken the economists’ orginal recommendation." I wouldn't define it so narrowly in terms of the "social backlash" (although this is obviously a problem in many cases). I would broaden it to situations where people think they can predict what will happen as a result of large-scale liberalization, but they really can't. Still, it's a good idea. But ultimately I'm not sure I like it for the same reason I don't like the terms "market failure" and "government failure". I think the idea of "failure" in general for these things is a bad way to think about it. An externality, for example, isn't a "failure" - it's just a description of the way the world works given a certain property regime and set of incentives. Indeed, in a situation of externality the whole problem is the market isn't complete - it seems strange to blamethe market for that. "Government failure" is odd too because often it's not the apparatus of government itself so much as the decisions that are made that turn out badly. If a firm goes out of business do we call that "market failure"? No. We say that given the institutional environment that firm didn't have what it took to be successful. The same goes with most things dismissed as "government failure". Demonstrating that a given piece of regulation is bad hardly proves that the act of regulating is unwise. I think these terms - "government failure", "market failure", and probably "liberalization failure" too aren't as clear analytically as they first appear. But it is good that Karl Smith is calling attention to the failure of libertarians to consider a lot of public choice problems associated with their ideas.

- I always have a tough time accepting the idea that the media has a strong liberal bias. New research suggests my suspicions might be good. You can get almost anyone - liberal, centrist, or conservative - to admit that Fox is pretty conservative. You can get almost anyone - liberal, centrist, or conservative - to admit that MSNBC is pretty liberal. There are obviously example of ideological news sources. But all the other major channels and all the big name newspapers seem to all be thought of as "liberal" by conservatives I talk to and "conservative" by liberals I talk to. That's a major clue-in that there's probably not all that much bias in them. Or to put it another way - if these news sources were unbiased, you would expect conservatives and libertarians to think they have a liberal bias, and you would expect liberals to think they leaned right. If they were biased, you wouldn't expect to see that symmetry. [And commenters - be a little circumspect about whether your brilliant refutation simply amounts to proving my point]

14 comments:

United States government limited its interventions to schemes such as Reconstruction Finance Corporation at the beginning of the Depression, although those were still radical in some respects. Result was a backlash resulting in Franklin Delano Roosevelt's New Industrial Recovery Act, which produced an agency that sometimes existed solely for punishing business.

Sweden adopted a corporativist economic system in 1937, under which industry, capital, labour, and agriculture would be represented in a single council that would discuss, approve, and reject any legislation the government passed. The result was a very clean avoidance of the huge mess of price controls, production controls, wage controls, industrial policy, and anti-business political posturing for which the United States government was known after early 1930s.

'Backlash interventionism' could be the idea that because certain liberal policies existed earlier, any illiberal policy is believed to be a good one, irrespective of any consideration as to what is the quality of intervention. Better in my view than "liberalization failure".

Perhaps we can emphasise that FDR himself avoided much backlash interventionism by making relatively modest interventions in comparison to American fascist admirers of Mussolini and American socialists.

"...I criticize what I consider to be their dangerous foray into social engineering."

Yeah, you do, and it has never been terribly convincing. Here's a question, what do you mean by social engineering exactly? I don't believe you've ever really defined the term sufficiently (could be that I simply have a faulty memory on the issue). Are you talking about Karl Popper's various definitions or what? BTW, it is only dangerous if you believe that somehow the current American institutional framework is written in stone - what happened between the 1930s and today is not some sort of natural equilibrium anymore than any other institutional arrangement is.

As I read more about the general criticism from the right and left of libertarians the more I realize that much of what is going on is merely a reaction to competition - libertarians have gained a toehold to some degree after all. We see these sorts of reactions to competition in a wide array of areas of human endeavor, etc. This also explains why you have so many very awful criticisms of libertarianism from the right and the left; these people don't know where libertarianism comes from or the general ideas informing it either.

"But it is good that Karl Smith is calling attention to the failure of libertarians to consider a lot of public choice problems associated with their ideas."

Yes, before this guy came along libertarians never, ever thought about this issue. You may or may not remember that back during the bailouts there was a lot of discussion amongst libertarians as to whether they should support them or not due to concerns like this. There were good arguments on both sides.

Prateek Sanjay,

FYI: When the Supreme Court was shooting down the various FDR-led "reform" programs (for example, _Schecter_), it enjoyed warm popular support. Large swaths of what FDR proposed were highly unpopular with the American public - this also includes various public works programs (this is why they were so quickly ramped down after they were started except in the case of young men). Currently there is a lot of resistance to more spending by the federal government, so if anything (at least in the U.S.), there is a significant tradition of backlash against, well, government in difficult economic times - I'm not suggesting that it is a tradition that trumps everything, but it is significant.

The assertion that I challenge is that libertarians have never somehow contemplated this notion. Libertarians don't need to this called to their attention. It is a mature ideology after all which has considered this and many other points which you seem to think are somehow novel criticisms of libertarianism. So what is and remains of low quality is your criticism of libertarianism. Honestly, this would be like me arguing that somehow modern liberals have never struggled with the internal contradictions in re: their notion of equality or where individual autonomy ends. Libertarians argue with themselves on all manner of issues including this one (indeed, it is a very big issue amongst libertarians for a number of kind of obvious reasons) and there is no need for such to be called to their attention.

Anyway, yours was not a remotely substantive response, so you haven't left me much to respond to.

Gary I never said it was a new criticism - in fact I call attention to others who have made the criticism. Nevertheless, people regularly reject the very notion of the criticism as if it's absurd so obviously it still needs stating.

As for the substance of my response - no, I didn't go into the details because it gets old walking you through things time after time after you blast everyone else in the comment section for being wrong. It's issue after issue. So yes, I'm just going to let you know that I know your responses for the most part and most of them don't give me much pause.

It's interesting to contrast his practical optimism with his theoretical take on things. In theory he tried to bring the marginal revolution back in the direction of the classical economists by concentrating on cost-of-production. Marshall was a great fan of Smith, Ricardo and Mill, while Jevons was much more critical, especially of Mill.

I never said you said it was new, I said you make it sound like libertarians have never discussed the issue amongst themselves (indeed, I don't even use the term "new"). Metaphorphic rock holds no power over you when it comes to density. And you make no qualifications whatsoever in your original statement; here is what you said on the subject:

"But it is good that Karl Smith is calling attention to the failure of libertarians to consider a lot of public choice problems associated with their ideas."

Not some libertarians, just, libertarians. We're a monolith. A hive mind apparently. No qualifications, no nuance, nothing. And after the fact qualifications and nuance are just that, after the fact.

"...no, I didn't go into the details because it gets old walking you through things time after time after you blast everyone else in the comment section for being wrong. It's issue after issue."

Wow, I'm so insulted by the mighty, overpowering intellect of Daniel. And no, I don't blast everyone in the comment section for being wrong; what I do is get onto you for your strange commentary about libertarians. I have no idea why you talk about libertarians even; are you even interested what we have to say?

I can say that criticizing libertarians has become something of a cottage industry on the left and right these days (it wasn't something that was common ten years ago and wasn't even on the radar twenty years ago). To me that illustrates the increasing influence of libertarians on the general zeitgeist.

I agree with you on the point about libertarian "social engineering." Most libertarians would say that's a contradiction in terms, but I don't believe so. Self-styled "Hayekians" argue putting everything under the price system, even though Hayek argued in favor of what Popper called "piecemeal social engineering," even though Hayek hated the term (preferring "tinkering").

I do, however, think on many of the margins you're getting at are addressed by many of the same "Hayekians," and in a certain sense have been over-addressed. In the comments section of the K. Smith blog post I pointed to a Shleifer paper. That same paper (along with similar positions put forward by William Easterly) has become this bizarre doctrine among libertarians over the last decade, that institutions *must* evolve gradually, that "informal" institutions are all that matter (see C. Williamson, for example), and that imposing the free market necessarily screws things up. This has reached the mainstream literature enough that Matt Ridley picked it up in The Rational Optimist.... and Easterly's mainstream influence is obvious.

I don't particularly like this reaction. It's almost to say that the movements away from communism only kinda worked, but it's not because the price system is bad, but the price system doesn't count except when it works. I still think the price system would be the best possible system, on far more margins than you would probably accept, but at the same time there are many important variables that are "orthogonal" to what we call economics but are important for economic outcomes.

I take it that Daniel is unfamiliar with the literature on media bias. For example, I doubt he is aware of the views of Eric Alterman, Ben Bagdikan, or Noam Chomsky. Maybe he has never even heard the phrase, "Working the refs" in this context. Saying something must be balanced because it is attacked by both liberals and conservatives is one of the easiest forms of ignorance.

re: "I never said you said it was new, I said you make it sound like libertarians have never discussed the issue amongst themselves(indeed, I don't even use the term "new")."

However you want to put it - I got your meaning. I know libertarians have talked about this sort of thing before, so once again your presumptions fall flat. I'm not sure where you could have gotten the idea that I don't think libertarians have gone over this.

Now - the fact that some libertarians have gone over this doesn't mean (1.) they've sufficiently considered it - clearly a large group of them haven't, or (2.) all of them have considered it - clearly many haven't. As long as I get shock at the fairly obvious point that libertarianism seeks to impose a top-down, untested blueprint on society it's worth making this point. Certainly people have considered this before. The evidence suggests it didn't sufficiently take.

re: "Metaphorphic rock holds no power over you when it comes to density."

If "Talking Down to Everybody Gary" is here again like he was a couple weeks back, just stop commenting here please.

Ryan - It's good you note the evolutionary institutions point - and the whole Ostrom literature goes with this too. It's incredible to me that libertarians associate themselves with this stuff, precisely because for the most part they seem antithetical to these evolved changes.

I think the reason ultimately is percisely what you say about Hayek - there are a lot of "libertarians on the margin", and despite the fact that they seem increasingly drowned out, it's those sorts of people that embrace the evolutionary institutions.

What's always a little frustrating is that people often like evolutionary institutions until it evolves into an institution they don't agree with. Indeed - I'd say the robustness of our own market democracy is quite obviously the product of institutional evolution. That this isn't often acknowledged by libertarians makes me wonder about their real thoughts on institutional evolution.

It's not that institutional evolution and libertarianism can't coexist - it's just that they often come across as strange bedfellows.

Robert -I'm familiar with Chomsky on media, not the others. Certainly the entire media bias literature is not one I'm deeply familiar with.

re: "Saying something must be balanced because it is attacked by both liberals and conservatives is one of the easiest forms of ignorance."

Well then it's a damned good thing I never said that.

Look - based on what little I know about Chomsky on this, I'm happy to concede that the media is "biased" in favor of a mainstream neoliberal center-of-gravity. But hovering over a center of gravity and not putting a Chomskian spin on everything doesn't seem to me to be "biased" in quite the same way. I'm not making the claim that newspapers are always of top quality. Clearly they're not. But they're not unrepresentative of the spectrum of views that's out there (part of this is tautological - they help create the views that are out there).

If you want to say that they are "biased towards the typical", then that's fine. It seems to explode the whole meaning of the word "biased" to me, particularly when there is a range of flourishing media sources around that center of gravity.

"As long as I get shock at the fairly obvious point that libertarianism seeks to impose a top-down, untested blueprint on society it's worth making this point."

If by "impose" you mean convince people voluntarily that "this" (whatever "this" is - that is up for debate as well) is the best way to go, then I suppose that word makes sense. It doesn't make any sense in any other way though. There really is nothing in the history of libertarianism to indicate otherwise; there are no libertarian "weathermen" for example. A bunch at think tanks and people talking about their ideas doesn't remotely come close to the use of language like that.

"If "Talking Down to Everybody Gary" is here again like he was a couple weeks back, just stop commenting here please."

You aren't "everybody." And to be frank, you really have no leg to stand on when it comes to talking down to people.